Fog, the background needs fog. It looks flat. The hills behind and even the distant castle look like they're painted on a backdrop just past the foreground grass. Some fogging or darkinging would help the distance.

Cheers for the comments guys; it was supposed to be a montage sort of thing, blending in different elements for a title page on a Hawaii website of a travel agency I'm working for. I was kind of experimenting a bit which is why it perhaps looks a little confused; I wanted the clouds and the waterfall to blend intogether seemlessly but I'm new to this kind of design.
I'm working on another pic, for their Bali office, which I'm doing in Photoshop; Unfortunatley, the foreground character lacks any continuity with the background as I drew them seperately; hopefully I'll sort that out by the time I'm done. The image in my head worked anyway
I did use photographic references for that image but I didn't copy directly, just to get an idea of texture, colour and so on.
For a better example of my 8bit work, take a gander at this:

Thanks for the feedback Cyberartist & Wakestarr. Originally I did have some fog in the background. But I wasnt really digging it that much. I think I go back in and play with it some more. I did use some reference photos for the image for the shading on the clothing,etc.

Hi, here's an almost finished photoshop image I've been working on; I've only recently migrated to photoshop having been an oldschooly dpaint freak for quite a while and I've been experimenting with layers on this image; I drew the balianese dancer first which probably explains why she doesn't fit in with the rest of the picture too well.
I'm still trying to find my feet with photoshop (I've had it for a while but I've only done 3 or 4 pics using ps) so I'm be interested in your comments and feedback.
http://members.aol.com/lutherart/art/baligirl.jpg

Ermm.. you are quite good. You are way better than me, and I've been using Photoshop for like 4 years. You are very talented dude. The only thing that I can find that is even SLIGHTLY off in your pic is the light source.. the source of light in the background doesn't seem to match that of which is shown on the dancer in the foreground. But even that isn't THAT noticeable. Great work.